Rimini Street Inc (RMNI) 2025 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Rimini Street Inc Q3 2025 earnings conference call. (Operator Instructions)

I would now like to turn the conference over to Dean Pohl, VP treasurer and Investor Relations. Please go ahead.

Thank you, operator. I'd like to welcome everyone to Rimini Street's fiscal third quarter 2025 earnings conference call. On the call with me today is Seth Ravin, our CEO and President, and Michael Perica, our CFO.

Today we issued our earnings press release for the third quarter ended September 30, 2025, a copy of which can be found on our website under the investor relations section.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables following the financial statements in the press release. An explanation of these measures and why we believe they are meaningful is also included in the press release and our website under the heading about non-GAAP Financial Measures and certain key metrics.

As a reminder, today's discussion will include forward-looking statements about our operations that reflect our current outlook. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

We You to review our most recent SEC filings, including a Form 10Q filed today for a discussion of risk that may affect our future results or stock price. Now, before taking questions, we'll begin with prepared remarks. With that, I'd like to turn the call over to Seth.

Thank you, Dean, and thank you everyone for joining us. In the third quarter, we continue to simplify and refine our go to market strategy and messaging around Rimini Street's three core service pillars support, optimize, and innovate and our smart path methodology that allows clients to capture cost savings with their existing ERP software, enabling them to invest in and leverage the benefits of AI innovation without spending above the current IT budget.

To this end, Rimini Street has staked out its position as the software support an agentic AI ERP company, a specialized partner in ERP that can extend the useful life of current ERP system assets while also delivering the latest next generation of ERP technology to clients.

We also continued our focus on methodical, predictable sales execution in both new logo acquisition and cross sales to existing clients.

third quarter results. Overall, sales bookings, and billings continued to improve, and we delivered strong ARR subscription renewals as well.

We closed 17 new client sales transactions in the quarter with TCV of over $1 million each for an aggregate TCV of $63.1 million compared year over year to 19 new client sales transactions for an aggregate TCV of $48.7 million.

We also added 79 new logos and achieved a record RPO backlog of $611.2 million, up 6.4% year over year. New logo sales include major global and regional brands. Sales to new clients and cross sales to existing clients spanned a mix of our products, services, and solutions and a broad set of industries and geographies.

Achievements included record third quarter SAP support sales, surpassing the key milestone of more than 100 VMware support contracts signed to date and closing more than 2 dozen client engagements around our new Agentic AI ERP innovation solution powered by the ServiceNow AI platform.

We plan to provide more insight and information on our agentic AI ERP solutions at our upcoming analyst and investor day on December 3, 2025.

While the majority of our sales in the quarter were completed by our direct sales force, we also achieve sales transactions through our maturing indirect channel. As the indirect channel matures globally, we see building sales opportunity pipelines.

Billings' growth was driven by a mix of new ARR subscriptions and project-based professional services, and the combined ASP for Oracle support services, SAP support services, and all managed services grew year over year.

In the third quarter, we had more global quota carrying sellers, a greater number of sellers participating in the total quarterly sales attainment, and a greater number of sellers achieving or exceeding quota when compared to the first half of 2025.

Exiting the quarter, we had 82 quota carrying sellers globally compared to 73 during the prior year third quarter.

Also, during the third quarter, we continued upgrading sales leadership talent with new leaders in EMEA and Southeast Asia and Greater China and materially expanded sales opportunity pipelines for future quarters along with broad progression of many pipeline opportunities.

Growth drivers, we continue to pursue growth drivers that leverage direct and indirect sales channels. We continue to H1 the skills and capabilities of our direct seller team, continuing to build our partnerships that provide expanded sales reach and sales cost leverage.

Additionally, we continue to build our go to market execution by industry, which will give us the opportunity to sell more deeply into clients with industry-based knowledge, insights, and Rimini solutions that solve specific industry challenges.

Two notable achievements were announced in the third quarter. First, we were added to the United States GSA multiple award schedule as an approved supplier of support and security services for Oracle, SAP, and VMware software. United States federal, state, local, and tribal government agencies can now procure Rimini Street services directly from the GSA schedule without a need for competitive procurement.

To leverage the GSA contract opportunity as well as our new management sales partnership with Merlin Cyber, Rimini Street has launched a US federal and state local education sales team.

Second, we entered into a strategic partnership with American Digital, a leading IT solutions provider specializing in custom data centre solutions based on HPE infrastructure to provide a full stacked solution with the Rimini Street providing the enterprise software support and managed services.

The partnership includes working together to help clients fund modernization with AI solutions and implement workflow and task automation on top of their current SAP and Oracle applications without any pressured, expensive, or low ROI vendor upgrades or necessary migrations.

Oracle litigation update. On July 7, 2025, the company and I entered into a confidential settlement agreement with Oracle. The parties entered into the settlement agreement to provide a full, final, complete, and global settlement. The US federal case known as Oracle International Corporation and Oracle America Inc versus Rimini Street Inc and Seth Ravin filed in 2014.

As reflected in the settlement agreement, the company intends to complete its previously announced wind down of its support and services for Oracle's PeopleSoft software no later than July 31, 2028. The company has continued to make progress towards achieving this requirement.

As the Oracle litigation noted above has now been settled, this is the last Oracle litigation update we plan to provide during earnings calls. We will, however, continue to provide financial disclosures around the Oracle PeopleSoft wind down until the wind down is complete.

For additional information and disclosures regarding the company's settled litigation with Oracle, please see our disclosures in our Form 8-K filed on July 9, 2025. Our second quarter Form 10-Q filed July 301, 2025, and our third quarter Form 10-Q filed today, October 30, 2025, with the US Securities and Exchange Commission.

Summary, we continue to focus on our support, optimize, and innovate solutions, including our new agentic AI ERP solutions powered by ServiceNow's AI platform.

Executing the right go to market strategy to fuel sales growth, increase profitability, and enhance shareholder value. Now over to you, Michael.

Thank you, sir. And thank you for joining us, everyone. Q3 2025 results. Revenue for the third quarter was $103.4 million, a year over year decrease of 1.2%, with the United States representing 45% and international representing 55% of total revenue for the quarter.

Excluding revenue derived from support and services provided solely for Oracle PeopleSoft products, revenue increased 2.5% versus the previous year.

Annualized recurring revenue was $391 million for the third quarter, a year over year decrease of 2.6%. Revenue retention rate for service subscriptions, which makes up 95% of our revenue, was 89%, with approximately 85% of subscription revenue non-cancellable for at least 12 months.

Effects movements for the quarter were minor, impacting total revenues positively by 0.2% during the quarter compared to a negative impact of 1% for the prior year third quarter.

Billings, as defined in our press release for the third quarter were $66.5 million, up 2% year over year. Adjusted billings, which exclude the PeopleSoft associated buildings, were $63.9 million, an increase of 6.7% on a year to year basis.

Gross margin for the third quarter was 59.9% of revenue compared to 60.7% of revenue for the prior year third quarter. On a non-GAAP basis, which excludes stock-based compensation expense, gross margin was 60.4% of revenue for the third quarter compared to 61.1% of revenue for the prior year third quarter.

The year over year reduction was largely the result of decline in revenue, primarily revenue associated with people's health services.

Excluding PeopleSoft associated revenue and related cost of goods sold, gross margin was also 60.4%. We continue to focus on driving operational leverage for improved systems, analytics, processes, and global staffing models across all of our offerings with the focus of continuous improvement of our best-in-class support.

Operating expenses, reorganization charges associated with our continuous cost optimization plan for the third quarter was $752,000 and totalled $7.7 million since we instituted this plan.

Our focus moving forward will be to continue the momentum we are building in our core business in allocating our investments to fund incremental skill sets that will help drive growth across our three pillars. Nonetheless, we do expect to incur additional reorganization costs during the remainder of 2025 as we optimize our model to capitalize on the existing opportunities ahead.

Sales and marketing expenses as a percentage of revenue or 36.7% of revenue for the third quarter compared to 34.2% of revenue for the prior year third quarter.

On a non-GAAP basis, which excludes stock-based compensation expense, sales and marketing expenses as a percentage of revenue was 35.7% of revenue for the third quarter compared to 33.6% of revenue for the prior year third quarter.

General and administrative expenses as a percentage of revenue excluding outside litigation costs, with 17.6% of revenue for the third quarter compared to 15.8% of revenue for the prior year third quarter on a non-GAAP basis, which excludes stock-based compensation expense, G&A was 16.5% of revenue for the third quarter compared to 14.6% of revenue for the prior year third quarter.

G&A expenses in the quarter were negatively impacted by slightly over $1 million due to non-recurring international transaction tax associated costs. Professional fees and other costs of litigation were $621,000 for the third quarter compared to $879,000 for the prior year third quarter.

The net income attributable to shareholders for the third quarter was $2.8 million or $0.03 per diluted share compared to the prior year third quarter net loss of $0.47 per diluted share. On a non-GAAP basis, we had a net income for the third quarter of $6.9 million or $0.07 per diluted share compared to the prior year third quarter of $0.22 per diluted share.

Our non-GAAP operating income, which excludes outside litigation income and spend, stock-based compensation, reorganization expense and litigation settlement expense was $8.5 million or 8.3% of revenue for the third quarter compared to 12.8% for the prior year third quarter.

Adjusted EBITDA defined in our press release plus $10.1 million for the third quarter or 9.8% of revenue compared to the prior year third quarter of 13.1% of revenue.

Balance sheet, we ended the third quarter, September 30, 2025, with a cash balance and short-term investments of $108.7 million compared to $119.5 million for the prior year third quarter.

On a cash flow basis, For the third quarter, operating cash flow increased $24.7 million compared to the prior year, third quarter decrease of $18.5 million.

The operating cash flow was positively impacted by the receipt of the litigation settlement proceeds during the quarter of $37.9 million. When excluding this payment, cash used during the period was approximately $13 million.

In the quarter, operating cash flow was negatively impacted by the effect of foreign currency, which was unfavourable by $1.3 million.

Deferred revenue as of September 30, 2025, was $226 million compared to deferred revenue of $223 million for prior year third quarter.

Backlog, also referred to as remaining performance obligation RPO, which includes the sum of build deferred revenue and non-cancellable future revenue, was a record $611 million as of September 30, 2025, compared to $575 million for prior year third quarter, a year over year increase of 6.4%.

When excluding the PeopleSoft associated backlog, RPO expanded 9.3%, underscoring the momentum we are building in our core underlying business.

PeopleSoft update, in 2024, we announced the wind down of our services for Oracle's PeopleSoft products and have now agreed as part of the Oracle settlement that we will wind down all PeopleSoft service revenue by July 31, 2028.

We have made progress in reducing both the number of PeopleSoft clients and related revenues since announcing the wind down. PeopleSoft revenue was approximately 5% of revenue for the three months ended September 30, 2025, compared to approximately 8% of revenue for the prior year third quarter.

PeopleSoft calculated billings were $2.5 million during the quarter compared to $5.3 million for the prior year third quarter, and year-to-date Q3 2025 buildings were $9.7 million compared to $19.7 million for the same prior year period.

Business Outlook, the company plans to provide forward-looking guidance at its analyst and investor day to be held on December 3, 2025, where the executive team plans to outline the company's market opportunity, solutions, go to market strategy, and financial goals.

This event will be open to attendance by the public via online registration and a live webcast link available on our website. This concludes our prepared remarks. Operator will now take questions.

(Operator Instructions)

Jeff Vanry, Craig Hallam.

Great, thanks for taking my questions. Can you hear me all right, Seth?

Yes, got it.

Okay, good stuff. Having some phone difficulties here. Appreciate you taking the question. So, a couple, I heard, I believe I heard the mention of 24 Agentic AI wins with ServiceNow. I think I might have missed some of the context there but expand on that. I mean, it's been relatively quiet since you announced that relationship. A year ago and this is a notable call out. I mean, what are these wins?

What's an average deal size on these wins, how many of these you have prior quarter versus this quarter and then, kind of what does the pipeline look like? It sounds like maybe you're really starting to see some traction here.

Yeah, Jeff, it's a great first start for us, as we announced the partnership with ServiceNow when Bill McDermott launched that in his earnings call a year ago. And it's taken about a year just to get the organizations aligned to work on a full global rollout, as they've got over 6,000 sellers that we're going to leverage to move the Rimini Street and ServiceNow combo.

And what we've accomplished, as we said, it's taken a while. We've got 26 customers on their way with the ServiceNow component, and we're building agentic AI ERP first transactions over those systems. So more to come. Our goal is that by the end of this year we will have 26 great use cases, all different types of ERP transactions, different customers around the world and different industries.

And as the whole challenge with AI isn't the technology, it's everybody trying to figure out use cases that are really leverageable and that's what we're going to deliver to the market.

And so how does that impact the P&L in terms of deal size?

I think right now it's negligible to P&L in terms of materiality. I think we always said 26 was going to be the time that we really start to monetize because we needed to get these use cases done first so that the sales teams for ServiceNow and Rimini Street can take these out into the marketplace and show other customers how AI in this agentic ERP model is going to be deployed, the value and the creation that we're able to bring to the market with it. So, really look for this to be a 26 number.

Got it. And then I guess again maybe a very high-level question but coming into the really difficult initial decisions from the court as it related to the Oracle case, the company was a solid double-digit grower. It's been a tough couple of years. You certainly seem to be putting in the bottom and showing some acceleration on a bunch of metrics.

But what do you think it takes to get this company back to double-digit top-line growth? How do we get there? What are the components that get us there?

Well, I think again we'll go over this nicely in the in the investor day coming up on December 3, but generally we're looking at two components. We're becoming the support and Agentic AI ERP company because we're uniquely positioned.

To extend the life of the existing systems, driving a huge amount of our higher margin support business and at the same time we're building the next generation of technology over it and helping customers avoid these big upgrades.

So, we expect this to be an acceleration to our core business, and we expect to see that grow nicely because whether a company is looking to save money or immediately leverage the AI technology and we hope they will. The combination starts off with them moving to Rimini Street on a wider variety of their platforms for support in order to save that money and reinvest it in technology.

So, I think again we're on the right track. I think all of the things we've been putting in place in terms of the products we've built out over the last few years are all coming to play now in this new agentic AI ERP model and the combination of what we're able to do to continue support on a wider variety of platforms.

Okay, maybe two last quick ones if I could just indirect and channel love it. I think there's so many potential ways to increase sales efficiency in terms of what you're working on there. Where is it now as a percent of revenues? Where do you think it's going?

And then my last one is also a numbers question, just thoughts on retention rates over the next few quarters. Thanks.

Sure. The first one in terms of where we think this is going to go, again, I think we're going to follow the plan that we've laid out. We'll get the numbers to you in the investor day. So, I think we want to just be careful about getting to any kind of numbers in this particular call.

But the other side of this, I just think again, we're going to lay out exactly the model that's going forward, the retention, I think, becomes extremely sticky, especially when you're taking systems and now you're able to put the agentic AI ERP over the top of the existing. System no upgrades required. No reason to switch to other ERP systems.

We've declared ERP software is officially dead. It'll be usable for the next 20, 30 years as a core transaction system. We're going to do that for customers, but all future changes, we believe, as you'll see with the software vendors, all believe will be done outside the system, and we're going to use AI to deliver it.

Okay, great, thanks for taking the questions. I appreciate it.

Sure, thanks.

Brian Kinstlinger, EGP.

Great thanks so much for taking my questions. If you could just help remind us your role in that partnership with ServiceNow, are you providing support services on top of the technology that ServiceNow is bringing? Is there an application development piece? Just remind us broadly what you're bringing to the table in this partnership.

Sure, Brian, they are producing a tool, and we are using that tool to create solutions and we're calling them the Agentic AI ERP solutions that we then layer on top of the existing ERP system.

So, what they get out of it is they get the licenses for the tool, the AI platform, and Rimini Street. Does all the work, so we have all the consulting labour to install the system to design these agentic AI ERP components and install them. Then we will run the system underneath the ERP component. We will also run the ServiceNow piece, so we pick up most of the revenue in that entire picture.

Now are these 24 to 26 customers or POCs whatever they are they with your existing client base? Are they generally new customers?

They are, I believe most of them, if not all of them, are existing customers who were very excited about the offering, and we engaged with them to deploy this first set for them.

Great. And then you spoke of a higher number of new clients wins in TCV year over year. What was the split between the US and international?

That's a good question. I don't have the answer on the exact split. I don't believe we published that particular number, but if you look at the --

How about a high level with that? I guess the key question for the last several years, obviously the US versus international. So, is the US beginning to make any material impact on the booking side to replace what you know is usually 10% attrition? I'm just trying to understand the bookings in the US mostly.

Sure. Well, the bookings in the US, I can tell you, if you look for the first three quarters of 2025, bookings are up 6%. And it's actually up higher if you if you take out the PeopleSoft component, but we are absolutely seeing a bookings growth in the US, and you saw that the booking's growth was strong outside of the US on the international.

So yes, I do think what we're seeing is a turn in the ship. I do believe when we look at the Logos, we look at the size of the transactions, the ASP. We even had on top of a record SAP quarter in across the world. We had a record booking for Oracle in the quarter as well, which was again another important piece of business that moved forward, and we of course want to highlight that as well.

Now if bookings are up 6% in the first three quarters, year over year [exe] [people] South US is down about 4.4% you highlighted, and while that number wasn't given last quarter, I'm sure it was a stronger comp. It was, it declined less than 4.4% based on what you did provide. So, what's behind the accelerated decline in the US unless I'm wrong.

Well, remember you've got accumulation of some prior quarters where we did have some losses and those have carried forward, but the new bookings aren't going to be reflected obviously in revenue on a radiable basis for a while.

So, you know we're saying what we're seeing is current, we're seeing the bookings coming up, which of course a great precursor to understand where we're going. We're watching the RPO come up. All these numbers are coming in again, sort of in this mid-single-digits, and then you look, if you take out the PeopleSoft, your revenue growth was actually positive over 2%, 2.5%.

And so, I think when you look at those numbers, Brian, you're really looking at metrics that are all supporting the idea that the business is turning around. We're starting to return to growth on the top-line. And I think that's the key indicator for this corner.

Right but on the international side, we've seen an acceleration of growth. Can you just kind of point to where that is? Is there a specific solution like SAP, Oracle, or VMware? Is it a new service? Is it geographic specific? Maybe you can point to one or two things that are driving that accelerated pace of growth.

Sure, internationally, as SAP is a bigger product than Oracle, except on the technology side for database. And so this represents a significant amount of SAP business done on the international side.

Okay, thank you.

Certainly, thanks Brian.

Richard Baldry, Roth Capital.

Thanks. I know it's kind of early, but when you look at the very top of the funnels, or, prospects at the highest end, has there been any change in, the engagement levels with those people who've been willing to, return calls whenever post the Oracle settlement, or do you think it's too soon to really gauge that?

I think we're roughly what, 90 days or so after the settlement announcement. So, from that point of view, do we see a change in the business relative to that? I would say, Rich, that we definitely have.

Real cases where prospects came back to us that were off the table before because they were concerned about litigation for the company.

So, I think that's a great measure that we're seeing. We've also had partners come back. Some rather large tech companies have come back to us who didn't want to do formal partnerships before because of the litigation where they cited it specifically and now, they've come back to us because the litigation has been settled and they're anxious to have conversations to move forward.

So, I think there's evidence building that as we suspected there would be customers, there'd be partners, people who didn't want to do business with a company that was involved in litigation, and now we're seeing that clear.

Got it. One sort of small one and then one a little bit bigger, will litigation costs pretty much trend towards zero near term or and would there be any in 2026 and then more importantly, can genre of AI materially lower your cost of service delivery and sort of curious where it could fit inside of, you're dealing with customers if there's headcounts that I would go steady or you could pull out. How do you think about using that in terms of your own business? Thanks.

So, question number one, we will continue to have some litigation costs because we associate that with the wind down of PeopleSoft and there's compliance, components related to litigation, things like that.

So, there will be some continuing costs, but as we said, we used to talk about $10 million a year in litigation costs. We would expect to see substantial reductions, and we already are in terms of the wind down of the litigation process so that that will absolutely inure to the benefit of shareholders and the financials in the years ahead.

Second question. We are absolutely focused on deploying AI across our entire company. We are looking at ways to reduce cost. We already use AI to improve service to customers, and we've been doing that for several years.

We have an internal team dedicated just to looking at ways to improve systems and processes using technology for leverage and reducing the amount of labour that we require as a business, we brought in a new global CIO, Joe Leandra, who has previously been the global CIO for Cathay Pacific Airlines, Emirates Airlines, China Light and Power and has deployed a significant amount of AI in those businesses.

And including being a Rimini Street customer as part of his portfolio, and we intend to aggressively pursue reducing internal costs with AI.

Got it, thanks.

Thanks, Rich.

Derek Wood, TD Cowen.

Hi Seth, Michael and Dean. This is Jared on for Derek.

Hello.

For the new for the new GSA schedule, how do you expect this to impact your ability to do business with the US government? Have you seen any initial proof points along these lines? Of course, understanding the current circumstances.

Sure, we of course have sought GSA for a long time. It's a complicated agreement to get through with all of Rimini Street's different products, and we got approved for Oracle, SAP, VMware support, as well as security products.

So, obviously a great win for us. We see this as a very important purchase vehicle not only for the federal government but for the local and state government and education institutions that look to the GSA and if you're on the GSA just like our framework agreements with many governments around the world, you're able to buy off that agreement without a procurement process.

So, that is a big one for Us considering public sector is our second to third largest group of customers globally. So, that's number one.

Number two on the federal side, we are engaged with different federal agencies. Again, this is a new team. This is a new motion for us, but in addition to the work we're doing directly, we are partners. With Merlin Cyber, who is a well known player in the federal space and also some local government, and we've done deals together already.

And so we're going to be working together both through with Merlin's capabilities and experience in the federal government and along with our direct work under the GSA.

Awesome, appreciate all that colour and then just follow-up on the government topic, should we be expecting any impact in your next quarter's results from the current shutdown?

No, I don't think we would expect to see any impact based on the shutdown.

Appreciate that. Oh yeah, Last one, from me, but 100 plus organizations on VMware, great to hear. Similar to the prior Service now question, could you break out sort of the mix of net new customers, new clients landing on the solution versus your cross motion into your existing base.

Yeah, we haven't broken that out as far as I'm aware. I'll have to go back and take a look, and we can certainly follow-up with you on a couple of these questions with the other breakouts. I think that from what I can tell you in looking at the deals, there are a good number that are in the existing client base, but I will tell you, I believe the majority of those customers are net new logos.

That's awesome to hear. Thank you very much.

Yeah. Thank you.

Alex Furman, Lucid Capital Markets.

Hey guys, thanks very much for taking my question. I was wondering if you can talk a little bit more about the partnership with American Digital is the goal here to be able to leverage the full stack solution in order to be able to go after more customers or is this something your existing clients have been asking for in order to better leverage cost effective AI tools? Any color there would be very helpful.

Sure, and welcome and thanks for picking up coverage of Rimini Street. One of the things that we've been looking at is there's been a big change in the way that VMware and other costs and other software suppliers have been working with various partners.

And these are companies, especially in the hosting space as you saw with our T-Systems announcement North America as well as American Digital. These are hosting providers and what's happened is, for example, if you were to upgrade your systems with SAP and you went with their what was formerly known as rise, you would have to be moved over to Azure, which of course means that the customer would no longer be their customer.

So, you have a lot of these providers who are in a pickle because their customers don't want to upgrade, and Rimini Street provides a great solution. But if the customer does upgrade, they could wind up leaving and having to go to a different provider for hosting service.

So, that's the kind of situation that's happening. And so, this is one where we can come in in a big win-win and help them with their customers who don't want to move forward, don't want to upgrade, provide a great solution and keep them on their platform, which again is a win-win for us in American Digital and HPE.

That's great to hear. Thanks very much and appreciate the kind words.

Sure, thank you.

We don't have any other questions at this time. I will now turn the call over back to Mr. Seth Ravin, CEO. Please continue.

Thank you very much and thanks everyone for joining us. We hope you join us for our Analyst Day 2025 on December 3. You can get registration right off our website on the investor relations page and again looking for a good health for everyone, and thank you for attending, and we look forward to seeing you at the analyst day and future calls. Thank you very much, everybody.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.